The 'Morgan Bonds'

by Ben Macri, Vassar '99

In February 1895 President Grover Cleveland was forced to strike a deal with J.P. Morgan which saved the United States Gold Reserves. At the time the United States was in the midst of a terrible depression and Cleveland's popularity was rapidly dwindling. Cleveland had continued to support the traditional gold standard while his party gradually jumped ship and merged with the Populist, bimetallic platform.

Understanding the crisis that the nation would undergo if the United States gold reserves disappeared, J.P. Morgan, magnate/financier, offered to help the government. Morgan (with a profit clearly in mind) offered to form a syndicate (headed by himself) which would buy bonds from the United States in exchange for 62 million dollars worth of European gold. Cleveland, unable to see an alternative, and realizing that it would be a matter of days before the gold reserves disappeared completely, agreed to the plan, and organized the bond sale. With the deal settled, the dollar managed to recover some of its value, and Cleveland could rest easy, knowing that the gold reserves were safe.

However, when news of this deal broke, public opinion turned against Cleveland even more than before. Most people ignored the fact that Cleveland had saved the United States' gold reserves. When people learned how profitable the deal turned out to be for the banks, who had immediately resold the bonds at marked-up rates, more contempt confronted Cleveland. There were even rumors that he had profited personally from the deal. The issue only helped to accelerate the decline of the Gold Democrats.

Populists jumped all over the issue, shouting that it was yet another example of Washington being in league with the international banks and Wall Street. To the Populists it was the perfect example of a conspiracy against the common man. There was an Anti Semitic thread to their argument as Populists railed against the Rothschilds House (a bank which was a member of the syndicate) as the source of the conspiracy, trying to suggest that Washington and Wall Street were in the hands of the Jewish banking houses of England, and that soon all of America would be as well.

Cleveland stood quietly by, trying to maintain his dignity as the public condemned the only decision he could have made given the circumstances. He and the few remaining Gold Democrats watched as even more of their party ran to the bimetallic platform, and waited silently, through the 1896 election, to see what the fate of their party would be.

In 1890 John Pierpont Morgan (1839-1913) inherited the business of his father, Junius P. Morgan, in 1890, one of the nation's leading financiers. The younger Morgan became a leading philanthropist and one of the nation's wealthiest men.

"Both attacked the President on the score of his negotiations with the foreign syndicate, Mr. Wolcott going to the extent of using some very coarse language. Mr. Lodge, who is coming to be known as a Senatorial pettifogger, devoted a half hour to abuse of the President, while professing to be in favor of the Hill resolution." From The New York Times, February 17, 1895.

"There was no longer any common ground for understanding between the silver and gold forces; and the agrarian regions were suffering too keenly to reason calmly. Bryan, denouncing the sale in the House, had the clerk first read Shylock's bond. The World declared that the syndicate was composed of bloodsucking Jews and aliens. [...]. By hundreds of thousands, hard handed Americans believed that Cleveland and Carlisle [Cleveland's Secretary of Treasury] had sold the credit of the republic to the Morgans and the Rothchilds, and had pocketed a share of the price. Their vituperative anger was additional evidence of a sectional and class bitterness that now made even armed revolution seem far from impossible. But Cleveland... was unmoved by abuse when he felt he had done right." Allan Nevins, from Grover Cleveland: A Study in Courage (p.665-666).

"...the blame lay upon the President. If he had saved the gold standard, he had not saved the country. But he never regretted his action. Years after his retirement, he said so. By that time no one was likely to accuse him of profiting from the deal himself, but he was still not forgiven for allowing the financiers to profit or for holding to gold when easy money was about to be achieved." Rexford G. Tugwell, from Grover Cleveland (p.259).